Hourly Rate vs Day Rate Advice Needed

[SWATTDesign]

I'm considering changing my fee structure from flat fee bases on estimated hours to complete times by hourly rate to flat fee based on estimated days to complete times by daily rate to help soften the blow of a rate increase to my existing clients.

A bit of history... I've been running a one man print design studio for about 4 years now. I come from an in-house background so when I started on my own I had now idea what to charge for my work. I have raised my rates once since starting, but I only applied this new clients coming in. Clients who have been with me since inception are still on my original rate. I have this week been awarded membership to the Design Business Association, which has given me access to an official charge out rate list and I've discovered just how unbelievably low my rates are when compared to industry averages of other designers of my level, discipline, and geographical area.

I should point out that I'm not just looking to raise my rates just to match what other designers are charging. I am looking to implement a considerable growth strategy over the next 18 months to develop my one-man studio into a proper agency.

As my current rates are so low, I just can't justify increasing my rates unto full industry standard, but I am looking to increase them by at least 50% (yes that's how low my rates are... I can increase them by 50% and still be below industry averages!). This is quite a hike for a client to take, which is why I'm considering the change from basing my fees on estimate hours to estimated days. In my head it softens the blow a bit, and gives the client the benefit to not being as restricted by time (especially during idea generation stages) so they hopefully feel they are getting better value for money.

What I'm after is people's thoughts on whether you think this is a valid idea, how would you implement it, and if you think it's a rubbish idea - do you have any other suggestions on how I can manage the change from what I'm charging now to what I need to be charging.

I'm a bit reluctant to put actual figures here, but if you need to know them in order to give me any constructive feedback, let me know and I'll disclose them in a PM.

Any feedback would be much appreciated.

Cheers,
Sam
SWATT Design Ltd.

 

[@GCarlD]

Hi Sam,

First of all I love the quote in your sig!

It sounds like your rates are way off what they should be (far too low), and I can understand your concerns. Have you tried or thought about increasing your rates gradually and see how your clients respond. If they ask, there's also no harm in explaining why you are increasing your rates, although I am sure they would probably be able to guess, as they'd know they have been getting what sounds like unbeatable rates for your services. At the end of the day, no two business' are the same, you have got to work with a fee structure that is best for your business. If by increasing your rates to 50%+ you will still be below industry standard, I wouldn't worry about losing clientel, as most people prefer to stick to what they know and are used to and what works for them, so they are not going to stop using your services just to have to pay even more to a company they have no experience with. But I would definitely make the increase gradually and maybe aim to hit your target rates by the end of the year?